Feeling the pinch of China's labor shortage
The world's largest workforce is perhaps already starting to shrink. China's working-age population declined by 3.45 million people in 2012 to 937 million, and the National Bureau of Statistics predicts declines will continue until 2030.
Foxconn, a manufacturer that produces Apple's iPhones, has decided to open plants further inland due to workforce shortages in Guandong province, a key manufacturing region. According to Bloomberg Industries, several of the company's competitors, including Quanta Computer, Pegatron, and Wistron, have done the same. In order to meet its production quotas, Foxconn is even considering implementing robotic workers to make up for the labor shortfall.
The iPhone manufacturer has doubled its workforce to 1.2 million in just the past two years and is now looking inland for workers. But the move away from Guandong is unlikely to reduce costs for the company; strong economic growth in Sichuan and Henan provinces has caused wages to jump 120 percent in the last six years, making them comparable to those in Guandong province. Thanks to these increases, workers in these areas who would have previously migrated to Guandong for the work have little incentive to do so.
Apple is not expected to pass along these increases to its consumers; iPhone prices have remained consistent over the last five years. Foxconn will likely have to absorb the increased costs, further shrinking its $8 margin on each iPhone produced. Yet it seems reasonable to question the sustainability of Apple's manufacturing model if production costs continue to rise and increased economic opportunity makes the traditional manufacturing job less appealing to workers.